| In the finance industry the industrialisation process is in full swing. New technology is leading to the emergence of completely new business models. Thanks to new technology, the sale of financial products is already freeing itself from production. A milestone in this process is PostFinance’s mortgage model that PostFinance, using the Avaloq Banking System, will start running in May of 2003. The combination of PostFinance as distributor and customer bank, Avaloq as technology partner and UBS as risk taker and producer redefines the value chain for credit products. Further business areas will follow.
PostFinance
With over two million customers, PostFinance, as a division of the Swiss Post, is an important force in the Swiss retail market.
The existing assortment of retail bank services will be expanded with three mortgage models for May of 2003. Presently, PostFinance already offers payment-, savings-, investment- and provident care products to its private customers. Corporate customers receive payment- and cash management products which enable individual solutions for payments at home and abroad, money market investments and foreign exchange trading. Upon its entry into the credit market, PostFinance will begin by offering products for private customers. Beginning in autumn of 2003, there will be credit products for corporate customers (KMU) as well as public corporations. The diverse range of offerings is tailored for classical retail customers and is easy to understand, highly standardised and reasonably priced.
The yellow credits of PostFinance
PostFinance entered into a cooperation with UBS in February of 2002. This cooperation is based on UBS’s recently launched business model "Credit Asset Transfer" (CAT). This model breaks away from the traditional value chain: PostFinance concentrates fully on advising and assisting its customers, along with selling credit and being as efficient as possible in the associated settlement. UBS focuses on re-financing the credit as well as taking on and managing the credit- and interest risks.
Once the private customer has decided on a type of mortgage, the customer service assistant passes on the corresponding information and documents to the processing platform, the credit settlement centre of PostFinance. UBS then makes a purchase price offer to PostFinance so that PostFinance can make its customer a binding offer. If the customer signs for the mortgage, the credit is acquired through UBS at the arranged price and the credit amount is transferred to PostFinance. The last step for PostFinance is to pay out the mortgage to the customer.
During the term of the mortgage PostFinance continues to take care for the customer and performs the servicing. Interest- and amortisation payments are forwarded to UBS accordingly. A credit loss is borne by UBS which, as “Asset-Purchaser,” also takes the appropriate steps for the utilisation of the collateral.
The project
Immediately after the board of directors of the Swiss Post decided to enter into a cooperation with UBS in the lending business in mid-February of 2002, PostFinance started the evaluation of a credit system. With the help of consultants from IBM Global Services the selection process commenced shortly thereafter and was completed in May of 2002 with the decision to introduce the Avaloq Banking System.
Beginning in May of 2003 PostFinance will already offer its “yellow mortgages” on the market. By this point in time, not only must the Avaloq Banking System be parameterised and interlinked with PostFinance’s systems, but the Internet portal intended as a further distribution channel must also be created. In order to be able to keep to this ambitious schedule, PostFinance will again receive assistance from IBM Global Services as system integrator. The know-how necessary for the parameterisation of the Avaloq Banking System is contributed by Monex AG, Avaloq’s implementation partner.
After the introduction of the lending business, PostFinance plans to migrate additional products to the Avaloq Banking System. Thanks to the Avaloq Banking System, in future PostFinance wants to be able to show all customers a consolidated view of their financial situation.
Avaloq Banking System
PostFinance’s use of the Avaloq Banking System shows that this system also has extensive functionalities in the area of retail and commerce. The open interface allows for a fast and efficient integration of the Avaloq Banking System in complex IT-settings with a multitude of interfaces which operate in real-time. These are important prerequisites for complying with the trend of breaking the value chain and lowering the vertical range of production.
The functionalities and interfaces realised in cooperation with PostFinance and UBS will be integrated into the Avaloq Banking System as standard functionalities and made available to all Avaloq customers in future.
According to Jürg Bucher, Deputy Head PostFinance, the Avaloq Banking System provides optimal support for PostFinance’s business model: “We’re using the Avaloq Banking System as a flexible and open platform with which we can quickly and easily put new products on the market and make use of them.“
Zurich , August 2002
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